Manx Financial Share Discussion Threads

[nick rubens] 04/10/2024 11:39

My recent purchase has been the fastest falling share value ever that isn't a dodgy AIM mining stock.

I'd like to pluck some courage up and treat this as a buy opportunity. From the recent Interims...

"Despite the difficult conditions that lie ahead, it is pleasing to announce another record half year with a 16% increase in our Profit Before Tax to £3.5 million (30 June 2023: £3.0 million). Our basic and diluted Earnings Per Share for the period increased to 2.07 pence (30 June 2023: 1.67 pence), and 1.59 pence (30 June 2023: 1.34 pence) respectively. Disappointingly, despite these impressive results, the Group is still trading at a 45% discount to Net Asset Value as at 19 September 2024"

My observation on the outlook portrayed by the recent Interims, is that every business would be affected by a so called labour government desperate to raise money by even more Taxation. It seems to me that the debt markets (gilts) are effectively calling the shots now with a national UK debt of £2.6 trillion.
It just sounded like a somewhat unnecessary rant as the last couple of decades and more have been a ridiculous parliamentary clown show anyway politically.

The UK has hit crunch time. Either reduce the public spend or tax the economy to it's death knell. This economic 'growth' narrative is pie in the sky IMO.

[smithie6] 04/10/2024 11:03

cash....& dividend...

---

"This gain in deposits allowed the Group to improve its liquidity, which it holds as cash or UK Government Treasury Bills, by £7.7 million to £95.9 million (31 December 2023: £88.2 million)."

cash & Govt treasury bills.
if this pays 4%
(the BoE base rate has been reduced I think to 5% but I think that Govt treasuries is paying less because the % anticipated future falls in the % rate)
it equals an income of
= £96m x 0.04%
= £3.8m

(this £96m value is probably too high, since ~£70m +/- X is in treasuries while ~£20m is held at other banks, with quick access in order to meet the banking liquidity reqts.)

If the % rate received by this 'liquidity' falls to be 2% averaged over say 2026
then the lower income would be
= £1.9m

The pbt for H1 , including all of PA ltd, =£3.5m, equates to £7m if H2 =H1, but prediction is a fall in perf. so let us pencil in £6.5m.

For 2026 with a lower BoE interest rate of 3% (& 2% paid on Govt treasuries) then the pbt would be lower if nothing else changes.
= 6.5 - 1.9
= £4.6m

(while the chairman writes that a fall in interest rates would be good for MFX. I don't agree. The fall in income from treasuries etc is easy to calculate & it is very real imo.
I never believe what the chairman writes, since it is often blatantly not true or is complete rubbish imo).

if 21% tax as per H1
then PAT for '26 might be
= 4.6- 0.97
= £3.6m (2026 guestimate)

10% as divi. = £360k
116 m shares.
so guestimate divi for '26= 0.31p
current share price to buy = 13.3p
divi % = 0.31/13.3= 2.3%

if give a p/e of 5 to a PAT guestimate for '26 of £3.6m the resulting cap. value is
= 5 x £3.6
= £18m

with ~118m shares at end of '26 that would be an undiluted share price
= 18/118
= 15.3p.

.....it might be some calculations similar to these that have made a big shareholder rush to sell shares
-------

to get the profit up & hence the share price, imo some of the following need to happen
- start making some nett money out of the £300-400m loan book !!!! after paying for the bank branches & staff & £1m for the expensive bod !!, apart from the profits made by the UK subsidiaries which are lenders.

- PA Ltd to expand successfully & without high costs. such as in to other sectors, but perhaps this previous strategy has been shelved forever. who knows. we don't !!!

- rapidly get profitable cashflow from the UK banking licence, not to make a profit at first but to reduce the loss !!

- imo reduce various of the costs which imo have bloated uncontrollably in last 24 months. 1/2 the cost of the bod & you save £1/2m. reduce the £1m cost for external banking services (!!!!), reduce the 0.9m increase in admin. costs, reduce the 0.9m increase in fees & comissions paid. There look to be various options for reducing some of the costs, if the motivation existed.

- obtain some growth from the smaller UK subsidiaries, outside of PA Ltd

- have a complete change of attitude for the co. accounts (ban Jim Mellon from writing anything & the CEO & the CFO should write the accounts, as per most company accounts) & NEVER again give 2 different numbers for the profit of the biggest subsidiary with a difference of x2 between the numbers with no explanation at all !!!!!
Did the accounts really do that ?
yes !! amazing !!

etc

--------

happy to see any different guestimates from other people or point out any mistakes in my calcs or assumptions.

[smithie6] 04/10/2024 10:48

'cash. £10m'


are you referring to cash held at end of H1 '23 or at the end of the year '23 ?

----

r u sure it was spent & not just lent out ??

[nakedmolerat] 04/10/2024 10:41

negatives

red marks over accounts
no director buys
trend downwards
seller

what are the postives?

3.5% dividend

how come the cash was 10 million in 2023 and now at half a million. where did the spend go?

[smithie6] 03/10/2024 19:04

M1Keg

"..conspiracy theory

.......Jim and the Dr said sod off and now they are throwing there toys (shares) out of the pram at a time and quantity to embarrass said people.

Or they just could just be in a distressed state through ineptitude"

..I hope it is not the Lichtenstein ppl since they held 17% !!
If it was Zeno Capital selling, they had 4-5%, much lower %.

It was strange imo that the big volume selling started so closely before the issuing of the H1 accounts, which imo were not good numbers & outlook.
Did the seller obtain any inside info ??

The 8-10 bod members all move in financial circles, including internationally, especially the chairman & Gregory Bailey (his business interests are mostly in Canada I think & perhaps also in USA)
....& their 'contacts'/communications might have helped attract Zeno Capital to buy 4-5% of the co.

A contact of the chairman is a tipster & he bought a chunk of shares.
Perhaps someone let some info slip before the H1 results were published.

[smithie6] 03/10/2024 17:52

sooty snipes

NAV
£37m. the H1 accounts give the value

a lot in goodwill & intangibles..
..~40% is in the value of goodwill in the subsidiaries (~£15m now after buying the second 1/2 of PA Ltd ) (incl. about £9.4m in PA Ltd now)....

& £4-5m in intangibles including IT...., which arguably has no value at all as an asset & in some companies it is counted 100% as a cost & not as an investment in intangibles & then depreciated over Z years. (when you do a major software upgrade every X years, your old software might be thrown away, as worthless, as out of date, in wrong software language etc & usually it has no re-sale value, so many investors give it 0 value, but it is a subjective topic)

£6.4m in 'property & fixtures' apparently but none of it is freehold owned property.
It is £4.4m of furniture & equipment & £1.4m 'right of use' asset.
For most investors used furniture & equipment has little real value or much lower than its claimed book value. And the right of use asset (whatever it is) is perhaps worthless in the eyes of most investors.

£37m shareholder assets is notably higher than the mkt cap. of £16-17m (undiluted; ~£20-21m diluted) but I think that is because some parts of the group are clearly loss making (Conister incl HQ, plc central costs) & reducing the group profit & hence the overall group's value. The high annual cost of the bod (£1m) reduces the group profit & hence reduces the cap. value. And the recent big seller has driven down the mkt cap.

If use the same capital gain from treasuries for H1 '24 as in H1 '23 then the H1 profit '24 was lower than for H1 '23, which doesn't help the share price. The profit & interest % margins are clearly lower in '24 than in '23. And the chairman says that H2 perf. will be below H1 perf., which also doesn't help.
------

..for me the various small UK subsidiaries have a real value, & PA Ltd clearly has a real value, since these 2 blocks are nicely profitable

while Conister IoM (incl. the plc HQ, bod) arguably has no value (or a negative value) since it is loss making & drags down the group results. And the IoM clients surely expect the IoM branches to be kept open & staffed, as per prior decades, so its difficult (or impossible) imo to reduce the staff & branch costs to reduce the annual loss. And the selling price or Asset Value for a group of loss making bank branches on the IoM is probably 0 or negative.

[smithie6] 03/10/2024 17:49

is it the Liechtenstein private equity mob selling...
or perhaps Zeno Capital (registered on some Caribbean tax haven island)

or .........

we wait to see

seems strange that still no RNS

[sooty snipes] 03/10/2024 16:37

Anyone have a NAV on MFX?

[m1keg] 03/10/2024 16:34

I have a conspiracy theory for you....

What if the Liechtenstein private equity mob bought up their shares thinking they could then have a word with Jim and the good Doc to whip the company private and make lots of lolly. Jim and the Dr said sod off and now they are throwing there toys (shares) out of the pram at a time and quantity to embarrass said people.

Or they just could just be in a distressed state through ineptitude.

[clocktower] 03/10/2024 15:00

All seem to smell.

[smithie6] 03/10/2024 13:16

tiger

you have mentioned the FD James Smeed a couple of times recently

you realise that his total shareholding in MFX shares is

ZERO !

over at lse:time the FD owns ~£350k in shares in TIME.

-----

and the total value of MFX shares held by non-execs (apart from Gregory Bailey who appears to be a friend or at least a close business collegue of Jim Mellon (& they are defined as a concert party in MFX shares))

is ~£6k. !!

:-(

[smithie6] 03/10/2024 12:42

note 7 to the H1 '24 accounts

business segments
"Asset & personal finance"
pbt

'23 £4m
'24 £3m

down £1m

that is surely part of the reason for the fall in share price.

(the large on-going expenditures (with no news to shareholders on progress :-( ) on hardware & in IT .....which are imo excluded from the PAT calculations don't help; if they were included the PAT would be notably reduced)

:-(

[lennonsalive] 03/10/2024 12:14

I remember holding this and it going up to 26p. Now look at it. I sold out a while back when it started to retreat after a rise. I'm like that with all stock now. It's a shame as I sold my time shares in the 40s as well

[smithie6] 03/10/2024 12:02

H1 results

in H1 2023 interest income was £21m & nett income was £15.6m

in H1 2024 interest income grew a lot to £27m

an increase of 29%

while the nett interest income (after paying the interest on deposits etc)

increased only by 6%....a very small increase compared with 29%

imo that is terrible !!

-----

& the trading income.....after deducting the increased cost of fees & commissions

increased by

0% !!!!!

Summary
total interest income up by 29% in H1 '24 wrt H1 '23
a very big increase

yet
the resulting increase in nett interest income was
0% !!

you couldn't make it up !!

and explanation of this & what action will be tsken to fix this...
..I dont see any explanation & plan in the H1 accounts

(there are investing phrases that growing turnover is vanity for dirs while it is the growth in profit that actually matters & if consider increase in capital gain of treasuries as a one off then profit was "down" despite a big 29% increase in interest income !!...that is quite worrying & imo questions the abilities of the dirs or the fundamentals of Conister bank (which I think is where the losses are coming from)

----
that might be one of the reasons for the recent seller.

any explanation of this in the accounts & explanation of how it will be improved ?
...I didn't see any real explanation nor detail of any plan to fix this
:-(

and in fact the H1 accounts text (or the presentation text) says that perf. in H2 is expected to be below that for H1.
:-(

[smithie6] 03/10/2024 11:44

H1 results

at top level

in H1 2023 interest income was £21m & nett income was £15.6m

in H1 2024 interest income grew a lot to £27m

an increase of 29%

but the nett income stayed the same at £15.6m !

That is "terrible" !
"terrible" !!!

What has been eating the money so it does not arrive at the bottom line ?!!!

-----
and MFX is located on the IoM ....10% tax rate for banks

yet MFX paid 21% tax in H1 !!!!

One wonders if MFX is fully utilising tax methods' to minimise the tax bill....since almost paying full UK tax.

& of course losses from operating Conister IoM & the cost of the IoM bod can not be used as a cost for calculating/reducing UK taxes. :-(

------
if the capital gain from treasuries had been the same in H1 '24 as in '23 then the PBT would have been £1m lower.
(was the £1m higher capital gain from treasuries in H1 '24 vs '23 a one off ?, one assumes so)

& the PBT would have been ~£1/2m lower than in '23.

The mkt does not like it when the profit falls.

That might be part of the reason there has been a big seller recently.

[smithie6] 03/10/2024 11:32

(& while moaning about the high cost of the bod (doubled from 2019 to 2023)

& the poor/opaque quality of reporting....including giving 2 different profit numbers for PA Ltd, 1 profit number being double the other one !!!

Personally I don't agree with the 2 exec dirs lending money to themselves at interest rates which are way below the market interest rate. And them lending money to themselves, risky imo. Be better imo if they (& the bod) borrowed £0 from MFX & kept their personal lives separated from their roles as directors at MFX).

[smithie6] 03/10/2024 10:58

tiger

You have any information regards:-

Will admin. costs continue to balloon in H2 as they did in H1 (= £3.9m, up ~£0.8-0.9m from H1 '23)

Will fee & commission costs continue to balloon in H2 as they did in H1 (= £3.8m !!, up ` 800-900k from '23) ?

The PAT in H1 2024 was £2.4m I think I recall.
+ ~£0.9m for 2 separate items...which are costs, that is big news imo. = ~£1.8m !!
...a very big % of the PAT of ~£2.4.

are the directors directing or is everything completely out of control !!

----

and do you have information (that has not been revealed to the mkt !) for why these have ballooned so much since H1 2023 ?

----

You have any information why the CEO of MFX joined the bod of the biggest & most exciting part of MFX, PA Ltd, (or it was the most exciting part !)
but then in January '24 he resigned from the bod at PA Ltd ?

You have any information for what remedial actions are going to be taken at PA Ltd ?

-----

everything at MFX seems to be secret imo !!!!!

------

and the peak for the share price in the last 2 years was 28p.
today it 13.5-14p to buy
half !

and that is after obtaining a UK banking licence & now owning 100% of PA Ltd
& it is very visible that not 1 of the army of non-exec dirs is buying shares. They don't seem to rate the shares as a buy.
:-(

[clocktower] 03/10/2024 10:03

You sound very negative now Smithie6.

Trouble is once they fall like this has, it seems to take on a life of it's own and just decline, until news flows that stems the fall.

[castleford tiger] 03/10/2024 09:42

Smithie

have you not addressed these with James the FD ?

Its very clear to me after speaking to James

tiger

[smithie6] 02/10/2024 15:22

the text of the presentation is now available.

for me it scores 0/10

- no explanation for the interim accounts giving 2 different profit numbers for PA Ltd, 1 number being double the other one !!
Perhaps spin a coin to pick one of the 2 different profit numbers !
And then invest or not based on that coin spin result ?

- the presentation says that the higher interest rates are bad for MFX. Yet with ~£100m in Govt treasuries MFX gets £4-4.5m/year in interest. (4-4.5% interest)
When the Govt interest rate on treasuries was zero MFX received £0/year from this liquid money.

So, the dirs write that receiving an increase in money received from liquid money (& MFX must keep a certain amount available to comply with the regs.) is bad for MFX.
Every other bank imo states in their accounts that they have received a notable boost to profits due to receiving a big increase in money from cash held in Govt treasuries, when it had been receiving zero %. And bank shares have risen over the last 12-18 months as a result.
MFX is the only bank imo which claims that receiving 4-4.5% ( £4m/cash) a year from Govt treasuries compared with the £0m it was 1-2 years ago....is bad for MFX !!

Personally I do not believe the MFX directors and think they are intentionally telling porkies. Instead I believe the directors of Natwest, Lloyds, Santander, HSBC et al.

- no information is given imo about the progress at Conister UK ltd.
It is now 1 year since the UK banking licence was obtained & the news about progress at Conister UK is...zero ! So far it is still not taking deposits !!!!!!!
Conister UK has expensive fixed costs for MFX, just the CEO get £300-350k/year & there are other staff as well. And an office of course, etc etc

- no information is given about what the bank will do to try to reverse the diminishing interest margin

- no information is given about the previously stated strategy of PA ltd expanding in to other sectors

- no information is given about the progress in developing new IT to digitise more bank processes

- zero explanation of the high % growth in money paid out via "fees & commissions".
When the company policy for the last ~7 years has been to reduce this commission.

£3.8m in H1 !!!.up from £3.05m in H1 2023.
£3.8m !!!!!
Money going out of MFX.
~£600k/month !!!
About 50% higher than the group's PAT !!!!

- administration expense has risen from £3.05m in H1 '23 to £3.9m in '24 !!!!!
+ ~30% !!
I can't see any explanation in the presentation.

MFX has small margins on its big loan book, after paying for it's bank branches & bank staff. So, management must keep close/tight control of costs. It appears to me that the MFX bod (which cost £970k in '23 !!!!!!!!) has let costs & commissions paid out just run wild.

Is the bod spending too much time on the golf course rather than doing it's management tasks ?
I note that the exec. chairman I think only went to 5 board meetings out of 8. If he can't go to all the board meetings perhaps he should step aside.

- there is a comment that to reduce group costs that management will review costs from suppliers.
Really ?! As if that will make any difference at all !!
Cheaper bags for the waste bins ?
A 5% saving on the paper forms clients use in the bank branches ?
Imo no real savings can be made with suppliers.
The cost of the bod has increased by £1/2m in 5-6 years. Admin. costs are up £800k between '23 & '24 !!!
(That imo is not due to increases from suppliers !!)
Why /How have the admin. costs & also fees & commissions increased so much so quickly ?!!!!!

----------

Despite repeated complaints from shareholders to the bod in recent years about the accounts presenting a PBT for the group (lse:mfx) which is not true (because the PBT number given includes all of the profit from PA ltd when in fact MFX only own/owned 50.1% of its pbt not 100%).....the accounts continue to do it !!!!!!

This continues imo to damage confidence in MFX from potential investors. Investors can read. When the trumpetted group PBT does not agree with the numbers in the depths of the accounts then imo some/many potential buyers of shares will just walk away & invest in a different share where the claimed profit agrees with the numbers inside the financial numbers.

The bod is receiving little confidence from the market, as shown by the chart for the share price.
The bod fully deserves this lack of confidence imo !!
======

Is the bod or the 2 main exec. dirs intentionally driving down the share price (via their operation of the co. ....doubling the bod cost, bloating commissions paid +30%, bloating admin. costs +30% & opaque operation of the group....) in order to assist the concert party of 2 directors (Jim Mellon & Mr Bailey) to perhaps make a takeover offer for the company which dejected shareholders are much more likely to accept, whereas if shareholders were happy with the company then they would need/require a much higher price for a takeover.

------
What is a fair price for the shares ?
Difficult to say imo.
Will admin. costs continue to balloon in H2 as they did in H1 ?
Will fee & commission costs continue to balloon in H2 as they did in H1 ?
Will the warning that H2 will be worse than H1 turn out to be true ?
Will the BoE reduce interest rates in 0-18 months as expected & how much will that reduce the income from treasuries (currently £4-4.5m/year, about the same as the annual PAT !)
Will Conister UK start to take deposits ?
If Conister UK starts to operate will that reduce or increase the cost of it to the group ? (An operating UK bank needs no one to answer clients' phone calls when it has no clients, when it is operating it will need staff to deal with any calls/problems from/with clients)

[castleford tiger] 02/10/2024 14:45

Tiger
you previously posted that you could not understand the para in the H1 accounts about PA Ltd

of which this text is a major part

"As anticipated, PAL has had a difficult start to this year, despite recording a profit of £1.9 million (30 June 2023: £1.5 million), but we have every confidence that our remedial actions will be successful...."

Do we all agree that MFX made no prior mention ever to shareholders of "an anticipated difficult start to the year for PA Ltd " ?

Was this section of text all explained in yesterday's webinar ?

If the profit has increased from £1.5m to £1.9m, a notable % increase, then why is remedial action needed ?!

What remedial action is being taken ?

Ok my understanding is as follows.

The results were as shown 1.9 pbt however as we all know Jim was having a bad day when writing his report.
I think he was speaking about how the business is doing NOW rather than how it had done.
Big ticket items sales have slowed.........since the election and the fear of tax rises have really pulled the market back.

So my understanding is that its now they are suffering at PAL ( so take it as a veiled warning)
Again the presentation and wording could be much better.

The key thing yesterday was the bod agreeing to meet investors here in the uk to share more on a F2F basis.

As a bank they are heavily regulated but the guys said call them and they will engage.

I understand you have had some direct comms with James??

Hopefully that was helpful

tiger

[william127] 02/10/2024 14:06

I am 99% it is an Investment Vehicle. Director Island based and easy to find on search.

[mrbt] 02/10/2024 13:21

The slides are there to see but no recording of the presentation.

[nakedmolerat] 02/10/2024 13:13

A copy of the presentation will be available in the Investor Relations section of www.mfg.im from 4:00 pm (BST) that day.

i cannot find it on their website.

[clocktower] 02/10/2024 12:32

The real issue here at present for current shareholders is:

Can you put the money invested here to better use and get a better return elsewhere at present?

In light of all the smoke and mirrors the accounts seem to reflect.